Disney Accused of Hollywood Accounting

     LOS ANGELES (CN) – Disney unfairly “exploited” the “Home Improvement” TV series by swapping its syndication rights for commercial time in New York City, and stonewalled calls for accounting, the show’s creators claim in court.
     Winder Dancer Productions sued The Walt Disney Company, in Superior Court.
     Wind Dancer seeks an accounting and damages for breach of contract and unfair competition.
     Plaintiffs include the show’s creators – Matt Williams, Carmen Finestra and David McFadzean – and four production companies.
     They claim that co-defendant Buena Vista Television, representing Disney, granted syndication rights to New York City station WCBS in exchange for commercial minutes, without cash consideration. And they say the deal was made without consulting them, as required.
     The complaint states: “Defendants have caused the series to be exploited in certain markets at well below-market value, including selling the syndication rights in New York City (the largest television market in the United States) for no monetary consideration; failed and refused to consult with plaintiffs in connection with the distribution of the series, including in syndication; and otherwise failed to properly account to and pay plaintiffs for their share of the profits from the series.”
     The plaintiffs also seek a declaration that Disney and Buena Vista are not entitled to deduct from the series’ gross receipts the costs of defending this action.
     They claim that Disney and Buena Vista “among other things, (a) have caused the series to be exploited in certain syndication markets at well below the fair market value of the series and against the interests of plaintiffs; and (b) have improperly accounted to plaintiffs for their substantial share of the profits of the series including, by way of example, but without limitation, improperly charging expenses to the series, improperly charging distribution fees, failing to report merchandising and music publishing revenue, establishing unreasonable video reserves, failing to report license fees for the sale of format rights in foreign territories and failing to credit tax benefits against foreign remittance taxes charged to the series, thereby reducing the plaintiffs’ share of the profits generated by the series notwithstanding the more than the one and one-half billion dollars of revenue earned by the series to date.
     “Defendants have a motive to shift revenues away from the series where possible and to other properties owned by defendants since artists and/or their production companies are entitled to receive 75 percent of 100 percent of all net profits generated by the series while defendants receive only 25 percent of 100 percent of the net profits from the series which is uncommon in the entertainment industry.”
     Plaintiffs claim Disney and Buena Vista received millions in “Home Improvement” syndication fees in other major cities, including $2 million in Sacramento, $2 million in Seattle and $3 million in Boston.
     However, the complaint states, “Defendants, through their affiliated entity, BVT (Buena Vista Television), have licensed the series to station WCBS in New York City, a television station owned and operated by the CBS Network, for its second cycle of syndication rights. Instead of receiving a license fee with a cash component and a barter component (compensation in the form of commercial minutes to be exploited by defendants) as is typical in syndication, BVT licensed the series to WCBS for barter only, even though New York City is the largest television syndication market in the country. In contrast, BVT licensed the series to KTXA, another CBS Network owned and operated station in Dallas, Tex., for an aggregate cash license fee of $3,575,000 plus barter. …
     “As a result, this undisclosed consideration and benefits was not shared with the artists and their productions companies pursuant to the operative agreements and the custom and practice in the industry.”
     The WCBS trade earned the defendants “millions of dollars in profits,” the plaintiffs say.
     They claim that an auditor they hired was forced to “wait in a queue” for access to Disney’s books.
     “At times, the ‘queue’ has lasted for more than 42 months before the requested audit field work could begin,” the complaint states.
     “Despite plaintiffs’ inquiries, objections and demands therefor, defendants have failed and refused, and continue to fail and refuse, to properly exploit the series and account and pay to plaintiffs their share of revenues generated thereby. Despite plaintiffs’ inquiries, objections and demands therefor, defendants have failed and refused, and continue to fail and refuse, to provide documentation that the terms of their dealings and agreements with WCBS were at arms-length and are fair and reasonable,” the complaint adds.
     “Home Improvement,” which debuted in 1991 on Disney-owned ABC, ran for eight seasons and was syndicated in 1993. The show continues to be a “cash cow” for the defendants, the plaintiffs claim.
     Actor-comedian Tim Allen played the lead, Tim “The Toolman” Taylor – a supposed fix-it pro bent on souping up cars and power tools.
     The plaintiffs seek a declaration of their rights under agreements, accounting, disgorgement with interest, and damages.
     They are represented by Marcia Harris with Robins, Kaplan, Miller & Ciresi.

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